Jones v Accident Rehabilitation and Compensation Insurance Corporation

IN THE DISTRICT COURT HELD AT CHRISTCHURCH Decision No. 2/9/98 IN THE MATTER of The Accident Rehabilitation and Compensation Insurance Act 1992 AND IN THE MATTER of an Appeal pursuant to Section 91 of the Act BETWEEN PHILLIP THOMAS JONES DCA 191/98 Appellant AND ACCIDENT REHABILITATION AND COMPENSATION INSURANCE CORPORATION a body corporate duly constituted under the provisions of the said Act Respondent HEARD on the 10th day of September 1998 APPEARANCES: Ms M Watson advocate for appellant Ms J Cheyne counsel for respondent RESERVED JUDGMENT OF JUDGE M J BEATTIE The issue in this appeal is whether an overpayment made by the Corporation to the appellant ought to be remitted pursuant to section 77(2) of the Act. 2 BACKGROUND The appellant was a tannery worker and part-time horse trainer. On 23 March 1995 when aged 34 years, he suffered a fall from a horse resulting in fractures of the cervical spine. His injuries caused incapacity and he was entitled to receive weekly compensation. It transpires that in calculating his entitlement to weekly compensation the Corporation made an error in the calculation of his income which resulted in a greater figure being used as the basis for the calculation of weekly compensation than ought to have been used. In addition, a second error was made when the appellant returned to work as a tannery worker but because of his injuries could not resume his horse training. The weekly compensation thereafter paid was not abated to take account of the income that he did in fact receive. The errors were discovered and the amount overpaid to the appellant amounted to $9,715.76 and would appear to have been paid in the period 23 March 1995 to December 1996. It is accepted by the Corporation that the appellant did not intentionally or otherwise contribute to the errors and that he accepted the money in good faith. Initially the appellant sought remission of the debt on the grounds of hardship and a case was put on his behalf to the Chief Executive of the Corporation. A decision was made that half of the amount owing would be remitted but that the appellant would be required to repay the sum of $4,857.88. 3 The appellant sought a review of that decision and the principal submission made to the Review Officer by the appellant's advocate was that the appellant would suffer detriment if he was required to repay, the family were now a single income family with commitments and could not afford to repay. The Review Officer considered the evidence and found that there was no evidence that the appellant had altered his position in reliance on the validity of the payments received and that the funds received had simply been spent on day to day living. On that basis the Review Officer ruled that there was no ground for it to be considered inequitable for the Corporation to seek repayment of the balance owing and ruled accordingly. In his appeal to this Court the appellant relies on the provisions of section 77(2) of the Act which states as follows: "The Corporation shall remit in whole or in part a debt which arose as a result of an error not intentionally contributed to by the debtor if the Corporation is satisfied that the person receiving the amount so paid in error did so in good faith and has so altered his or her position in reliance on the validity of the payment that it would be in equitable to require repayment." In her submissions to this Court Ms Watson, advocate for the appellant, submitted the following circumstances as entitling the appellant to relief under section 77(2). i) The Jones family's financial circumstances had altered in that Mrs Jones was no longer working, she having given birth to their first child approximately one month after the accident. 4 if) The appellant had credit card debts as well as income tax to pay and had mortgaged a property to pay off those debts. iii) The appellant owned an investment flat on which there was a mortgage but in respect of which the income received was less than the mortgage payments and if he had known his weekly compensation ought to have been less than that received he would have made the decision to sell the flat at that time. The market for same now having gone flat and he is not able to recover his full equity. Ms Cheyne, counsel for the respondent, submits that none of the foregoing amounts to an alteration of position in reliance on the validity of the payments. Mrs Jones was already pregnant with their child before the accident, the debts for which money was borrowed had already been incurred and the monies so received was simply spent on daily living and meeting their usual commitments. Counsel submitted that a four step approach needed to be satisfied before an entitlement to remission under the Act accrued, those four steps being: (i) An overpayment arose as a result of an error not intentionally contributed to by the debtor (ii) The debtor received the overpayment in good faith (ifi) The debtor altered his/ her position in reliance on the validity of the payment (iv) It is inequitable to require repayment. 5 Counsel submits that whilst the appellant satisfies (i) and (ii) above, he cannot satisfy (iii) and (iv) and in reliance on the decisions of this Court in Hurley (Decision 49/98) and Fraser (Decision 137/98), no entitlement for remission can be made out. DECISION This Court accepts unreservedly that the appellant did not intentionally contribute to the error and that the appellant received the overpayment in good faith. The question is whether he has so altered his position in reliance on the validity of the payment. On the facts as they have been established both at the review hearing and in this Court the appellant received a greater weekly sum than he was entitled but that the amount received was modest and simply absorbed in day to day living expenses. It was received over a period of some 21 months. Insofar as the appellant's submission of now being a one income family, they having had their first child shortly after the accident and indeed now have a second child, I find that this is not a factor to be taken into account. The decision to have a family had obviously been made well prior to any compensation being received. It is noted that the appellant had an investment flat for which he had previously borrowed the sum of $45,000 and this mortgage was extended by a further $6,200 during the time that he was on weekly compensation to cover a credit card indebtedness and an income tax bill. The purpose of raising that mortgage was not to engage in any new venture but simply to pay off pre- existing debts and those debts were not incurred in any way in reliance on the amount of weekly compensation he was receiving. 6 This Court notes that the appellant has put forward general financial hardship as a basis of it being inequitable to require repayment but I find that the Court cannot look at the equities simply on that basis. This Court has previously ruled both in Hurley and in Fraser that the equities of the matter cannot be considered unless the Court finds that the appellant has altered his position in reliance on the validity of the overpayment. The mere spending of the money received is not of itself an altering of position and an inequity can only arise in the circumstances of an altered position. If there is no altered position in reliance there can be no inequity in requiring repayment. I find that this is the situation here. There is no evidence of any altered position in reliance on the overpayment and therefore, there is no basis for finding that it would be inequitable to require repayment. Accordingly, the Corporation's decision to require the payment of half the sum outstanding cannot be found to be wrong and this appeal is therefore dismissed. DATE at WELLINGTON this day of 1998 death.. MJ Beattie District Court Judge Jones.doc(gm)